How to Get Your Short Sale Offer Approved... All the Ingredients - Part 1 of 3

By: Cory Boatright Posted on: 2008-11-02 ** Print Article ** ** Copy Article ** - Category Feed

Article Summary: A concise and complete "how to" for submitting and getting your short sale real estate offers approved.

Short sale real estate is becoming a new trend for real estate investors everywhere. What is it? A short sale is when a bank agrees to accept less than what is owed on a property in order to liquidate their inventory and clear their books from non-performing assets. Here is what they consider for a short sale approval.

The following steps are to be used as guidelines on determining what to offer the lender to get a short sale acceptance. It is recommended that you consult a legal adviser before involving yourself in any real estate transactions.

All the steps you need to know:

1. Determine Fair Market Value (FMV)

2. Evaluate Sold Comps Systematically

3. Reveal the ARV (After Repair Value)

4. Figuring out the Lenders BPO

5. What is The House Type?

6. Learning the Loan Types

7. Memorizing the Percentages

8. How to Deal with Junior Lien Holders

9. In Closing

The FMV can be determined by evaluating sold, comparable properties in a similar or close proximity to the subject property. Realtors have access to what is called the MLS (Multiple Listing Service). This service provides an inventory of properties available, sold or pending a sale. This analysis will identify sold comparable properties with same square footage, bedrooms, baths, garage and other similar characteristics. Request the Realtors use a sold time frame within 6-12 months when pulling properties in the immediate or surrounding areas. Usually the short sale lender will not consider any sold comparables that are older than 12 months and that are further away than 2 miles from the location of the subject property.

2. Evaluate Sold Comparables Systematically

Contrary to popular and often misguided belief; you can use a formulaic system to work in your favor when determining what to offer on the short sale property. The way this works is like this

Let's say you have eight sold comparables. You would take out the two highest comps and the two lowest ones and average the rest.

EXAMPLE:

You have a property you think is worth $145,000.

A Realtor pulls a CMA and you find eight sold comparable properties.

The MLS (Multi Listing Service) shows the following sold property values:

$159,000 $154,000 $153,000 $161,000 $148,000 $143,000 $146,000 $151,500

When you use the formulaic approach you would take the two highest sold comparables ($159,000 and $161,000). Take out the two lowest sold comparables which is ($143K and $146K). This would leave four others comps.

$154,000 $153,000 $148,000 $151,500 -----------

You would then take an average by simply adding up the sum of all the sold comparables and dividing them by the total number of properties left. In this case, that number would be four.

Total: $606,500 divided by 4 = $151,625

You can reasonably justify the house may sell for $151,625 instead of the $145,00 you originally estimated.

3. Reveal the ARV (After Repair Value)

This terminology is jargon or slang often used with real estate investors. It is similar to the FMV with a few differences. The ARV is made up by the amount of repairs the investor thinks the property needs in order to sell quickly on the open market using FSBO (for sale by owner) techniques and not using the MLS.

It can be argued the ARV is more of a guess or suggested value derived by using sold comparables from houses that were NOT sold by a Realtor. One way to explain the difference is a Realtor will typically use a FMV (Fair Market Value) evaluation method. A real estate investor will consider an ARV (After Repair Value). An appraiser can use both value methods, but generally sticks to the ones that come from off the MLS. The ARV is a less accurate and dependable value than what come off the MLS. It doesn't hurt to know both.

(continue reading.. How to Short Sale Real Estate and Get Your Offer Approved - Part 2 of 3)


Copyright (c) 2008 Cory Boatright

Article Source: http://www.upublish.info

About the Author:
Cory Boatright
short sale

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